Correlation Between Spectrum Income and Spectrum International

Can any of the company-specific risk be diversified away by investing in both Spectrum Income and Spectrum International at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Spectrum Income and Spectrum International into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Spectrum Income Fund and Spectrum International Fund, you can compare the effects of market volatilities on Spectrum Income and Spectrum International and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Spectrum Income with a short position of Spectrum International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spectrum Income and Spectrum International.

Diversification Opportunities for Spectrum Income and Spectrum International

0.66

Correlation Coefficient

Spectrum Income  Spectrum International

Poor diversification

The 3 months correlation between Spectrum and Spectrum is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Spectrum Income Fund and Spectrum International Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spectrum International and Spectrum Income is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Spectrum Income Fund are associated (or correlated) with Spectrum International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spectrum International has no effect on the direction of Spectrum Income i.e., Spectrum Income and Spectrum International go up and down completely randomly.

Pair Corralation between Spectrum Income and Spectrum International

Assuming the 90 days horizon Spectrum Income Fund is expected to generate 0.25 times more return on investment than Spectrum International. However, Spectrum Income Fund is 4.04 times less risky than Spectrum International. It trades about 0.0 of its potential returns per unit of risk. Spectrum International Fund is currently generating about -0.03 per unit of risk. If you would invest  1,137  in Spectrum Income Fund on September 3, 2024 and sell it today you would earn a total of  0.00  from holding Spectrum Income Fund or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Spectrum Income Fund  vs.  Spectrum International Fund

Spectrum Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Spectrum Income Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Spectrum Income is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Spectrum International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Spectrum International Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong essential indicators, Spectrum International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Spectrum Income and Spectrum International

The main advantage of trading using opposite Spectrum Income and Spectrum International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spectrum Income position performs unexpectedly, Spectrum International can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Spectrum International will offset losses from the drop in Spectrum International's long position.

The idea behind Spectrum Income Fund and Spectrum International Fund pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.